Non-Profit Organizations: Law and Policy

by Phelan, Marilyn E.; Desiderio, Robert J.

• ISBN13: 9780314261984
• ISBN10: 0314261982
• Format: Hardcover
• Copyright: 2003-08-01
• Publisher: West Group

Summary

The law school casebook provides comprehensive coverage of the laws relating to the nonprofit sector. It describes the possible organizational structures for nonprofit organizations, sets out the rules and procedures to organize and operate a nonprofit organization, discusses the fiduciary obligations of directors and trustees, as well as the penalty taxes for failure to follow certain Federal standards of care. It also covers Federal tax laws relating to obtaining and maintaining tax-exempt status for nonprofit organizations as well as the taxation of nonprofit organizations.

Table of Contents

PREFACE	v
TABLE OF CASES	xxiii
Chapter 1. Overview of the Nonprofit Sector	1	(26)
I. Nature of a Nonprofit Organization	1	(26)
Note	2	(1)
Questions	3	(1)
Association for Preservation of Freedom of Choice v. Shapiro	3	(2)
Note	5	(1)
Questions	6	(1)
Slee v. Commissioner	6	(2)
Questions	8	(1)
Haring v. Blumenthal	8	(1)
Notes	8	(7)
Questions	15	(1)
Big Mama Rag v. United States	15	(5)
National Alliance v. United States	20	(5)
Questions	25	(1)
Nationalist Foundation v. Commissioner	25	(2)
Problem	27	(1)
II. Organizational Structure of a Nonprofit Organization	27	(19)
A. Trust	28	(1)
Restatement, Trusts	28	(1)
348. Definition of Charitable Trust	28	(1)
364. Indefinite Beneficiaries	28	(1)
380. Extent of Trustee's Powers	29	(1)
B. Association	29	(1)
Uniform Unincorporated Nonprofit Association Act	29	(1)
Section 4	29	(1)
Section 6	30	(1)
Problem	30	(1)
C. Nonprofit Corporation	30	(17)
1. Model Nonprofit Corporation Acts	30	(1)
2. Status of a Nonprofit Corporation as a Charitable Trust	31	(18)
Uniform Supervision of Trustees for Charitable Purposes Act	31	(1)
California Government Code	32	(1)
12580	32	(1)
12581	32	(1)
Younger v. Wisdom Society	32	(6)
People v. George F. Harding Museum	38	(1)
Question	39	(1)
Commonwealth of Virginia v. The JOCO Foundation	40	(6)
Questions	46	(2)
Problem	48
III. Nongovernmental Organization (NGO)	46	(1)
IV. Foreign Nonprofit Organizations and Abroad Philanthropy	47	(15)
Notes	48	(1)
A. Synopsis of French Law on Non-Profit Organizations	49	(4)
1. Associations	49	(2)
2. Foundations	51	(1)
3. Public Interest Foundations	52	(1)
4. Corporate Foundations	52	(1)
B. Synopsis of Italian Law on Organizations	53	(9)
Note	54	(1)
Revenue Ruling 63-252	54	(4)
Revenue Ruling 66-79	58	(3)
Questions	61	(1)
Chapter 2. The Nonprofit C	62	(31)
I. Nature of a Nonprofit Corporation	62	(4)
In re Mt. Sinai Hospital	62	(4)
II. Creation of a Nonprofit Corporation	66	(1)
A. Articles of Incorporation	66	(1)
B. Bylaws	67	(1)
C. Authorization to Conduct Affairs in Another State	67	(1)
D. Obtaining Tax-Exempt Status	67	(1)
III. Directors	67	(11)
A. Management of a Nonprofit Corporation	67	(6)
Bailey v. American Soc. for Prevention of Cruelty to Animals	68	(2)
Solomon v. Hall-Brooke Foundation, Inc	70	(3)
B. Meetings of Directors	73	(1)
C. Removal of Directors	73	(5)
Grace v. Grace Institute	73	(3)
Collins v. Beinecke	76	(2)
IV. Members	78	(15)
Note	78	(1)
A. Rights of Members	78	(6)
In re Mt. Sinai Hospital	79	(1)
Harris v. Board of Directors of Community Hospital	80	(4)
B. Meetings	84	(1)
C. Removal of Members	84	(8)
Raulston v. Everett	84	(4)
Question	88	(1)
Bartley v. Augusta Country Club, Inc.	88	(1)
Rowland v. Union Hills Country Club	89	(3)
D. Members' Derivative Actions	92	(1)
Notes	92	(1)
Chapter 3. Governance of a Nonprofit Organization	93	(76)
I. State Standards of Conduct	93	(54)
A. Fiduciary Obligations	94	(24)
Litwin v. Allen	94	(2)
Questions	96	(1)
Stern v. Lucy Webb Hayes Nat'l School-Deaconesses, Missionaries	96	(8)
Louisiana World Exposition v. Federal Insurance Co.	104	(4)
Note	108	(1)
Questions	109	(1)
Uniform Management of Institutional Funds Act	109	(1)
Uniform Prudent Investor Act	110	(1)
Revised Model Nonprofit Corporation Act	111	(1)
Section 8.30. General Standards for Directors	111	(1)
Section 8.32. Director Conflict of Interest	111	(1)
Questions	112	(1)
Northeast Harbor Golf Club v. Harris	112	(6)
B. Indemnification of Directors	118	(5)
John v. John	119	(4)
Note	123	(1)
C. Disposition of Assets upon Dissolution	123	(6)
Holden Corp. v. Southern Illinois Hosp. Corp. Hospital	123	(3)
Note	126	(1)
Sharpless v. Religious Society of Friends	126	(3)
Question	129	(1)
D. Enforcement of Fiduciary Obligations	129	(17)
In re Estate of Stern	129	(3)
Questions	132	(1)
Herzog Foundation, Inc. v. University of Bridgeport	132	(8)
Russell v. Yale University	140	(2)
Cornyn v. Fifty-Two Members of the Schoppa Family	142	(4)
E. Volunteer Immunity from Liability	146	(1)
II. Federal Standards of Conduct	147	(22)
A. Self-Dealing	147	(6)
Estate of Reis	148	(5)
B. Excess Benefits Transactions	153	(17)
Caracci v. Commissioner	154	(11)
Questions	165	(1)
Notes	166	(2)
Problem	168	(1)
Chapter 4. Charitable Organizations	169	(27)
I. Background	169	(1)
II. Section 501(c)(3) Elements	170	(1)
III. Organizational and Operational Tests	170	(20)
Better Business Bureau v. United States	171	(3)
Questions	174	(1)
Public Corp. v. United States	175	(2)
Monterey Public Parking Corp. v. United States	177	(1)
Columbia Park and Recreation Ass'n v. Commissioner	177	(13)
Questions	190	(1)
IV. Social Welfare Organizations	190	(6)
Regan v. Taxation With Representation	191	(5)
Chapter 5. Obtaining and Maintaining Tax Exempt Status	196	(70)
I. Obtaining Tax Exempt Status	197	(1)
II. Maintaining Tax Exempt Status	197	(69)
A. Commercial Activity	198	(12)
Living Faith, Inc. v. Commissioner	200	(10)
Questions	210	(1)
B. Private Benefit	210	(19)
American Campaign Academy v. Commissioner	211	(18)
C. Private Inurement	229	(18)
Church of Scientology of California v. Commissioner	229	(11)
United Cancer Council, Inc. v. Commissioner	240	(7)
D. Excess Benefit Transaction	247	(3)
E. Action Organization	250	(15)
1. Lobbying Activity	250	(1)
Christian Echoes National Ministry, Inc. v. United States	251	(1)
Notes	257	(1)
General Counsel Memorandum	257	(1)
Notes	261	(1)
Problem	262	(1)
Notes	263	(1)
Problem	264	(1)
2. Political Campaigns	264	(1)
Notes	265	(1)
F. Public Policy	265	(2)
Questions	265	(1)
Chapter 6. Public Charities	266	(29)
I. Requirements for Public Charity Status	266	(1)
II. Section 509(a) Organizations	267	(28)
509. Private foundation defined	267	(1)
A. Section 509(a)(1) Organizations	268	(5)
1. Churches	268	(1)
2. Educational Organizations	268	(1)
3. Hospitals and Medical Research Organizations	269	(1)
4. Organizations for the Benefit of Colleges and Universities
5. Governmental Units	269	(1)
6. Publicly Supported Organizations	270	(1)
One-Third Support Test	270	(1)
Facts and Circumstances Test	272	(1)
Unusual Grants	272	(1)
Problem	273	(1)
B. Section 509(a)(2) Organizations	273	(2)
1. One-Third Support Test	273	(1)
2. One-Third Investment Income Test	274	(1)
Note	275	(1)
Problem	275	(1)
C. Section 509(a)(3) Organizations	275	(18)
1. Organizational Test	275	(1)
2. Operational Test	276	(1)
Lapham Foundation, Inc. v. Commissioner	277	(16)
D. Section 509(a)(4) Organizations	293	(1)
E. Filing Requirements	294	(1)
Chapter 7. Private Foundations	295	(43)
I. Private Operating Foundation	296	(1)
II. Excise Tax	297	(10)
Problem	298	(1)
Zemurray Foundation v. United States	298	(6)
Greenacre Foundation v. United States	304	(3)
III. Self-Dealing	307	(5)
Estate of Reis v. Commissioner	308	(3)
Problems	311	(1)
IV. Failure to Distribute Income	312	(6)
Note	312	(1)
Problem	312	(1)
Note	313	(1)
In re Estate of John A. Hermann	313	(4)
Question	317	(1)
V. Excess Business Holdings	318	(1)
Note	318	(1)
VI. Jeopardizing Investments	318	(1)
Note	318	(1)
VII. Taxable Expenditures	319	(11)
Mannheimer Charitable Trust v. Commissioner	319	(11)
VIII. Termination of Private Foundation Status	330	(8)
Gladney v. Commissioner	331	(6)
Problem	337	(1)
Chapter 8. Fundraising	338	(69)
I. The Importance of Fundraising	338	(1)
II. Regulation of Charitable Solicitations	339	(16)
Riley v. National Federation of Blind of North Carolina	339	(10)
Question	349	(1)
United Cancer Council Incv. Commissioner	350	(5)
Question	355	(1)
III. Charitable Contribution Deductions	355	(37)
A. Quid Pro Quo	356	(22)
United States v. American Bar Endowment	357	(4)
Revenue Ruling 67-246	361	(7)
Revenue Procedure 90-12	368	(4)
Notes	372	(6)
B. Services	378
C. Timing	373	(1)
D. Unconditional Gift	373	(1)
E. Amount of Deduction	374	(4)
1. Amount of Contribution	374	(1)
2. Long-Term Capital Gain Property	374	(1)
3. Ordinary Income Producing Property	375	(3)
4. Percentage Limitations	378
5. Carry forward of Charitable Contribution Deduction	377	(1)
F. Appraisals of Donated Property	378	(3)
Revenue Procedure 66-49	378	(3)
Note	381	(1)
G. Substantiation	381	(1)
H. Deferred Giving	382	(10)
1. Charitable Remainder Trusts	384	(1)
Revenue Procedure 89-21	385	(1)
Revenue Procedure 89-20	388	(1)
Note	391	(1)
2. Charitable Gift Annuity	391	(1)
IV. Cy Pres Doctrine	392	(15)
United States v. Cerio	393	(13)
Notes	406	(1)
Questions	406	(1)
Chapter 9. Unrelated Business Taxable Income	407	(63)
I. History of the Unrelated Business Income Tax	408	(3)
A. Pre-Revenue Act of 1950	408	(1)
B. The Revenue Act of 1950	409	(1)
C. The Regulations	410	(1)
Questions	411	(1)
II. Organizations to Which 'UBIT' Applies	411	(1)
III. Elements of the Unrelated Business Income Tax (UBIT)	411	(59)
A. Unrelated Trade or Business	411	(13)
Professional Insurance Agents v. Commissioner	412	(8)
United States v. American Bar Endowment	420	(4)
Question	424	(1)
Note	424	(1)
B. Regularly Carried On	424	(8)
National Collegiate Athletic Ass'n v. Commissioner	425	(7)
Question	432	(1)
C. Substantially Related	432	(10)
United States v. American College of Physicians	433	(8)
Notes	441	(1)
Problems	442	(1)
D. Exceptions to "UBIT"	442	(2)
Problems	444	(1)
E. Modifications	444	(26)
1. Rents	445	(1)
2. Royalties	446	(1)
Sierra Club, Inc, v. Commissioner	446	(6)
3. Unrelated Debt-Financed Income	452	(1)
University Hill Foundation v. Commissioner	452	(1)
Problem	466	(1)
Question	466	(1)
Mose and Garrison Siskin Memorial Foundation v. United States	466	(1)
Note	469	(1)
Chapter 10. Churches and Other Religious Organizations	470	(59)
I. Definition of a "Church"	470	(15)
Foundation of Human Understanding v. Commissioner	470	(8)
Question	478	(1)
Lutheran Social Service of Minnesota v. United States	478	(7)
II. Membership	485	(7)
Serbian Eastern Orthodox Diocese v. Milivojevich	485	(7)
III. Association Status	492	(20)
A. Liability of Members of a Religious Organization	493	(4)
Notes	493	(1)
Smith v. Calvary Christian Church	493	(4)
B. Property Ownership	497	(15)
Presbyterian Church in United States v. Hull Presbyterian Church	498	(5)
Holiman v. Dovers	503	(3)
Mills v. Baldwin	506	(4)
Wood v. Benedictine Society of Alabama	510	(2)
IV. Incorporation of Religious Associations	512	(6)
Murphy v. Traylor	513	(4)
Notes	517	(1)
V. Specialized Tax Issues Relating to Religious Organizations	518	(11)
A. Involvement in Political Activities	518	(8)
Branch Ministries v. Rossotti	518	(8)
B. Tax Audits of Churches	526	(1)
C. Other Tax Issues	527	(2)
Problem	528	(1)
Chapter 11. Schools	529	(48)
I. Role of Private Schools	529	(27)
Pierce v. Society of the Sisters of Holy Names of Jesus and Mary	529	(3)
Questions	532	(1)
New Life Baptist Church Academy v. Longmeadow	532	(13)
Question	545	(1)
Zelman v. Simmons-Harris	546	(10)
II. Tax Exempt Status of Private Schools	556	(13)
Bob Jones University v. United States	556	(12)
Question	568	(1)
Notes	568	(1)
III. Rights of Students	569	(8)
A. Suspension of Students	569	(6)
Harris v. Trustees of Columbia University	569	(6)
B. Privacy Rights	575	(2)
Note	576	(1)
Chapter 12. Hospitals	577	(61)
I. Organizational Structure	577	(8)
Questions	577	(1)
American Hospital Association v. Hansbarger	578	(7)
II. Reorganizations of Nonprofit Hospitals	585	(28)
Question	587	(1)
Revenue Ruling 97-21	587	(7)
Question	594	(1)
Revenue Ruling 98-15	594	(7)
Redlands Surgical Services v. Commissioner	601	(11)
Question	612	(1)
III. Exemption from Property Taxes	613	(18)
Question	613	(1)
Lamb County Appraisal District v. South Plains Hospital Clinic	613	(5)
Utah County v. Intermountain Health Care	618	(13)
IV. Abandonment of Nonprofit Hospital Status	631	(3)
Queen of Angels Hospital v. Younger	631	(3)
V. Conversion to For-Profit Status	634	(4)
State of Florida v. Anclote Manor Hospital	634	(3)
Questions	637	(1)
Notes	637	(1)
Chapter 13. Social Clubs	638	(48)
I. Nature of Social Clubs	638	(3)
Revenue Ruling 58-501	638	(3)
II. Right of Association	641	(6)
Board of Directors, Rotary International v. Rotary Club of Duarte	641	(6)
II. Right of Association-Continued
Question	647	(1)
New York State Club Association, Inc. v. City of New York	648	(8)
Questions	656	(1)
Boy Scouts of America v. Dale	656	(10)
III. Taxation of Social Clubs	666	(8)
Portland Golf Club v. Commissioner	667	(6)
Notes	673	(1)
IV. Business Use of a Social Club	674	(3)
Revenue Procedure 71-17	674	(3)
V. Fraternities and Sororities	677	(9)
Zeta Beta Tau Fraternity v. Commissioner	678	(7)
Problem	685	(1)
Chapter 14. Trade and Professional Organizations	686	(37)
I. Trade Association Status	686	(8)
National Muffler Dealers Association, Inc. v. United States	686	(6)
Guide International Corporation v. United States	692	(2)
II. Trade Shows	694	(1)
III. Political Activities	694	(6)
American Society of Association Executives v. United States	695	(5)
IV. Antitrust Regulations	700	(18)
Goldfarb v. Virginia State Bar	701	(7)
National Collegiate Athletic Assoc. v. University of Oklahoma	708	(10)
V. Membership in Trade Associations	718	(5)
Austin v. American Association of Neurological Surgeons	718	(5)
Chapter 15. Political Organizations	723	(26)
I. Regulation of Political Organizations	723	(17)
Beaumont v. Federal Election Commission	724	(16)
II. Taxation of Political Organizations	740	(1)
III. Separate Fund for Political Expenditures of Nonprofit Organizations	741	(1)
IV. Political Activities of 501(c) (3) Organizations	742	(4)
Branch Ministries v. Rossotti	742	(4)
V. Registration Requirements for Tax Exempt Political Organizations	746	(3)
527. Political organizations	747	(2)
Chapter 16. Homeowners' Associations	749	(18)
I. Nature of Homeowners' Associations	749	(1)
II. Rights and Liabilities of Members	750	(17)
Inwood North Homeowners' Association, Inc. v. Harris	751	(4)
Question	755	(1)
Brooks v. Northglen Association	755	(4)
Trustees of the Prince Condominium Trust v. Prosser	759	(2)
Question	761	(1)
Ashcreek Homeowner's Association, Inc v. Smith	761	(2)
Texas Residential Property Owners Protection Act-Selected Sections	763	(22)
Question	785
Oregon Revised Statutes 94.560	765	(2)
INDEX	767